Winston Smith of Oceania

Wall Street Breakfast: Must-Know News

"GMAC will likely receive another $3.5B injection, adding to the $12.5B the feds have already used...the Treasury has said it will provide GMAC with as much money as it needs" Meanwhile, they are sucking up deposits from healthy, stable banks by offering ridiculous rates through Ally. Of course they can afford to pay high rates on their CD's, the government is subsidizing it.

Wall Street Breakfast: Must-Know News

If you destroy a free market you create a black market. If you have ten thousand regulations you destroy all respect for the law. -Winston Churchill

Call Buying Surged Before 3Com Takeover Announced

Hmm...let's see Goldman Sachs Group advised 3Com on the transaction, while Morgan Stanley helped Hewlett-Packard. It couldn't possibly be anyone connected to Goldman, could it?

Wall Street Breakfast: Must-Know News

"Any review of the government's actions 'must be considered in light of the unprecedented circumstances in which they were made.'"...and any unruly mobs toting guns marching toward Washington must be considered an adequate response in light of the government pillaging the people.

Wall Street Breakfast: Must-Know News

The IRS had sued UBS to disclose 52,000 US clients suspected of tax evasion. They got 8.5% of what they asked for. How is that the raging victory as the IRS claims? Who paid who to keep the other 91% secret?

As GM Goes, So Goes the Nation (Part 2)

“The budget should be balanced, the Treasury should be refilled,
public debt should be reduced, the arrogance of officialdom should
be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt. People must again learn to work, instead of living on public assistance.” Cicero, 55 BC

Talent shift: Could a high-IQ exodus from finance lead to stronger productivity growth and a more robust economy?

You have Andrew Hall, a trader, in a battle to once again make $100 million a year, Steve Schwarzman of Blackstone making $702,440,573, Lloyd Blankfein making $72 million, and Steven Schonfeld, owner of a trading firm collecting $200 million. And what did they produce? Wealth for the shareholder? Not likely, most profits (or lack thereof) paid the company executives. What good did they bestow to humanity? Nothing! If anything, their net effect was negative. Whether it was creating financial instruments that contributed to this liquidity mess or trading oil contracts that they never had any interest in taking delivery for. Meanwhile, the average human saw their fuel consumption cost double. Why? Just so someone could play a high-stakes game and make more than a lottery winner in a single year. At what cost has this excess damaged humanity? What if all this effort and brain power actually went toward a noble cause? Would we as humans be better off today? Will the person that finds a cure for cancer or figures out how to land a human on Mars be paid quite as handsomely over their lifetime what these guys made in one year? Doubtful. What has humanity come to that the highest paid are those that shuffle paper?

Tuesday Outlook: Commodities, Global Markets

The FED is not a tool for the people but they are tools. Here is the article Dave referred to:

Wall Street profits from trades with Fed By Henny Sender in New York

Published: August 2 2009 23:04
Wall Street banks are reaping outsized profits by trading with the Federal Reserve, raising questions about whether the central bank is driving hard enough bargains in its dealings with private sector counterparties, officials and industry executives say.


The Fed has emerged as one of Wall Street’s biggest customers during the financial crisis, buying massive amounts of securities to help stabilise the markets. In some cases, such as the market for mortgage-backed securities, the Fed buys more bonds than any other party.
However, the Fed is not a typical market player. In the interests of transparency, it often announces its intention to buy particular securities in advance. A former Fed official said this strategy enables banks to sell these securities to the Fed at an inflated price.

The resulting profits represent a relatively hidden form of support for banks, and Wall Street has geared up to take advantage. Barclays, for example, e-mails clients with news on the Fed’s balance sheet, detailing the share of the market in particular securities held by the Fed.

“You can make big money trading with the government,” said an executive at one leading investment management firm. “The government is a huge buyer and seller and Wall Street has all the pricing power.”

A former official of the US Treasury and the Fed said the situation had reached the point that “everyone games them. Their transparency hurts them. Everyone picks their pocket.”

The central bank’s approach to securities purchases was defended by William Dudley, president of the New York Fed, which is responsible for market operations. “We believe that opting for transparency is a greater good,” he said. “If we didn’t have transparency, we’d be criticised on other grounds.”

However, another official familiar with the matter said the central bank “has heard that dealers load up on securities to sell to the Fed. There is concern, but policy goals override other considerations.”

Barney Frank, chairman of the House financial services committee, said the potential profiteering may be part of the price for stabilising the financial system.

“You can’t rescue the credit system without benefiting some of the people in it.” Still, Mr Frank said Congress would be watching. “We don’t want the Fed to drive the hardest possible bargain, but we don’t want them to get ripped off.”

The growing Fed activity has coincided with a general widening of market spreads – the difference between bid and offer prices – as the number of market participants declines. Wider spreads enable banks, in their capacity as market-makers, to make more profit.

Larry Fink, chief executive of money manager BlackRock, has described Wall Street’s trading profits as “luxurious”, reflecting the banks’ ability to take advantage of diminished competition.

“Bid-offer spreads have remained unusually wide, notwithstanding the normalisation of financial markets,” said Mohamed El-Erian, chief executive of fund manager Pimco in Newport Beach, California.

Spreads narrowed dramatically during the years of the credit bubble.

Brad Hintz, an analyst at AllianceBernstein, said he doubted that spreads would ever return to those levels, a development that could be pleasing to the Fed.

“They want to help Wall Street make money,” he said.

Mark Sunshine to Peter Schiff: "Peter, do you really not trust the data that the government publishes? Do you think that Treasury, the Fed and the BEA are like the Iranian election commission?"Schiff: "I think government data is compiled to create a false sense of prosperity so that politicians can claim credit for growth that is not real and be more easily reelected."

Data....Ha! As the famous quote says, "there are lies, damn lies, and statistics." And as John Williams questions , "Have you ever wondered why the CPI, GDP and employment numbers run counter to your personal and business experiences? The problem lies in biased and often-manipulated government reporting."

Now that 10 banks have been approved to repay TARP, what's going to happen with the stock warrants the Treasury owns? Pricing the warrants is tricky and given the government's tendency to let banks underpay, the most likely losers are the taxpayers.

Once again...of course the taxpayer loses. It was gamed that way from the start. As Barry Ritholtz said, "It was all an elaborate ruse, a coverup of the fact that Citigroup was busted...The hurry to repay this cheap cash confirms that the fix was in. If this banks were really in the basd shape Paulson suggested, they would hold onto this cheap source of credit. Instead, they want to throw the yoke of government monies off as soon as possible.The desire to return to their old compensation packages for executives cannot be the only factor..."

With tweleve years of stock market profits down the drain, Prozac Nation author Elizabeth Wurtzel wonders why no one is stating the obvious: The whole system is warped. "I would love to call the system despicable or detestable or something evil-sounding, but that would be giving it too much credit. It's really just the march of dunces."

Smegma, on a long enough timeline, the survival rate for everyone drops to zero. In the long-term, we're all dead. Good luck holding...

The government's pending bank stress tests are being blasted by FDIC insiders, who say it's a pointless exercise that's more sizzle than steak.

That's because the FDIC knows that they can't cover $8 Trillion in claims.

Friday Outlook: Commodities, Emerging Markets

Ifi I recall what Nouriel Roubini said: there is a disconnect between the more and more aggressive policy actions of the government and the market direction. This indicates that the markets have lost confidence in the ability of congress or government in general to do the right thing. For instance, when the bailout of Bear Stearns occurred in March, there was a rally in the stock market that lasted about 8 weeks. Then when trouble started to occur in July with Fannie and Freddie, Hank Paulson went to Congress to get the power to stabilize Fannie and Freddie. The result was a rally that lasted about 4 weeks. Next, in early September, Paulson made trillions of dollars available to loosen up credit markets. The rally lasted 1 day. The next week when the collapse of AIG occurred, there was not even a rally, instead, panic. The market fell 5 percent. Then they went for the TARP legislation, and you would expect that that would have improved the markets. On the Thursday after the Senate passed it, and on the Friday when the House passed it, stock prices fell sharply. The government didn’t stop there. The following week they took more action to loosen credit. The market fell that week by 20 percent.

Don't expect too much. It won't last.

"During last summer's debate over the bailout and stimulus packages, we warned of the potential for fraud in such massive government spending. Sadly, it's turning out to be true. And given the stunning level of corruption so far, don't be surprised when further revelations of fraud and fiscal malfeasance emerge." (IBD)

“Owners of capital will stimulate the working class to buy more and more expensive goods, houses and technology, pushing them to take more and more expensive credits, until their debt becomes unbearable. The unpaid debt will lead to bankruptcy of banks, which will have to be nationalized, and the State will have to take the road which will eventually lead to communism.” – Karl Marx 1867

Add in this gov't corruption and CFO's being killed...we're not that different than Russia, are we. USSA, USSA, USSA...

Wednesday Outlook: Commodities, Global Markets

All this AIG noise... Does anyone know who is the plan sponsor for the congressional retirement account?